On November 14, the Circuit Court of St. Louis County lifted a temporary restraining order against St. Louis County’s Mortgage Foreclosure Intervention Code [pdf], allowing an ordinance to go into effect which requires lenders to offer mediation to homeowners before foreclosing on residential property. The court ruled [pdf] the ordinance was not pre-empted by state foreclosure law and cited the county’s valid exercise of its police power. We previously reported that the temporary restraining order was issued on September 27 at the request of the Missouri Bankers Association and Jonesburg State Bank. While foreclosing lenders now must comply with the terms of the ordinance or be subject to a fine of up to $1000, the St. Louis Post-Dispatch reported that the Missouri Bankers Association and Jonesburg State Bank plan to appeal the court’s ruling.

St. Louis County’s foreclosure mediation ordinance prescribes certain procedures in addition to what is required under Missouri foreclosure statutes. In particular, to comply with the terms of the ordinance, a foreclosing lender must engage in the following:

  1. Send a Notice of Mediation to the homeowner concurrently with the Notice of Foreclosure, informing the homeowner of its right to request mediation within 30 days from the date of mailing
  2. Send a copy of the Notice of Mediation to a county-appointed Mediation Coordinator along with a non-refundable $100 fee
  3. If the homeowner fails to request mediation, the lender is issued a Certificate of Compliance with the ordinance
  4. If the homeowner requests mediation, the Mediation Coordinator will schedule a Mediation Conference within 60 days of the date of mailing of the Notice of Mediation, and the lender will then have the following additional responsibilities:
  • Upon receipt of the scheduled Mediation Conference, the lender must pay to the Mediation Coordinator a $350 fee at least 10 days prior to the Mediation Conference
  • Submit a non-binding proposal to avoid foreclosure at least 10 days prior to the Mediation Conference, along with an appraisal or broker’s price opinion, an evaluation methodology, an estimate of the property’s short sale value, and a statement of any prior offers the lender has made to the homeowner to resolve the default
  • Send a representative to attend the Mediation Conference who has settlement authority, has knowledge of the homeowner’s loan history, has access to the homeowners account information, and has the ability to review new loan options with the homeowner

Engage in a “good faith effort” to come to an agreement with the homeowner  

As long as the lender puts forth a “good faith effort” to avoid foreclosure at the Mediation Conference, a Certificate of Compliance will be issued to the lender even if the lender and homeowner fail to reach a settlement. If the lender elects not to comply with the ordinance and proceeds with foreclosure pursuant to Missouri’s foreclosure statutes, it will be in violation of the ordinance and subject to a fine of up to $1000. However, under Section 727.700 of the ordinance, the Recorder of Deeds is prohibited from refusing to record a conveyance deed for a lender’s failure to comply with the terms of the ordinance.